`Barter` Tv Ads An Alternative To The Networks

August 20, 1985|By Richard W. Stevenson, The New York Times

NEW YORK — Sunday afternoons, WNEW-TV here broadcasts an episode of Fame, the series about students at a high school for the performing arts. Instead of paying cash for the right to televise it, however, WNEW gives up half of the 20 commercial slots in the show to its syndicator, LBS Communications Inc. LBS, in turn, sells the time to national advertisers.

The practice, known as barter syndication, is one of the fastest-growing trends in the TV and advertising industries. Advertising expenditures stemming from barter deals have tripled since 1981, to about $575 million this year, and are expected to reach $1.4 billion by 1990, according to Mark A. Riely, a media analyst at F. Eberstadt & Co..

The key to barter is the ability of the syndicators to persuade stations all over the country to swap some of their advertising time for free or reduced-rate programming. If syndicators can get a show on the air in markets representing at least 60 to 70 percent of the nation`s viewers, they can then sell the advertising time to advertisers on a national, rather than city-by- city, basis.

Not surprisingly, while advertisers and many stations applaud the growth of barter, it appears to be making the three major networks nervous. They see barter as an increasing competitive threat that diverts advertising dollars from their own coffers and keeps their rates lower than they would otherwise be.

The barter process is very close to the way the networks operate, in that it delivers programming to local stations with national advertising already inserted; the only big differences are that barter programs generally are not shown at uniform times or days on the various stations that carry them, and that barter advertising rates are cheaper than network rates.

For the stations, barter is often a relatively cheap way of filling their schedules. Programming costs have skyrocketed in recent years, and independent stations and local affiliates of the networks are increasingly gambling that the potential profit from the advertising time they are giving up in a barter deal is less than the cost of buying alternative programming capable of generating similar ratings.

``You`re obtaining a good piece of product for no cash layout, so your risks are low,`` said John Serrao, general manager of WATL-TV, an independent station in Atlanta. Although bartering for goods often has some tax advantages, station owners and syndicators say they do not apply when swapping programming for advertising time.

Advertisers are signing on with the barter syndicators because the syndicators offer programs that command a national audience at a less expensive cost per thousand viewers than the networks charge. That has become especially appealing to advertisers as the share of homes tuned in to the networks has declined while network ad rates have continued to climb. Barter is generally at least 15 percent cheaper than network time.

A similar type of arrangement, in which stations paid for programming with spots from their future inventory of commercial time, led to a scandal at J. Walter Thompson, the advertising agency, several years ago. But the industry`s reputation has improved since then. As the amount and quality of barter programming expands to include first-run programming, movies, specials and daytime shows, increasing numbers of advertisers are expected to use it as an alternative or supplement to their usual buys on ABC, NBC and CBS.

Riely estimates that barter, which represents about 5 percent of the $9.77 billion that will be spent on broadcast network, cable network and barter advertising this year, should grow to 9 percent of the total in five years.

Indeed, some already see barter as a fourth network, albeit on a program- by-program basis. The most popular barter shows are picked up by stations in nearly every city, giving them a potential viewing audience as large as the networks.

The networks` concern does not have advertisers or their agencies shedding any tears. ``It used to be a seller`s market,`` said Larry Blasius, vice president for network programming at BBDO Inc., the advertising agency. ``Now the networks are seeing that barter and also cable are emerging as real competitors.``

Some of the shows, usually those such as Fame that are shown once a week, are offered to stations on a ``pure barter`` basis -- the stations pay nothing in cash, but give up 40 to 50 percent of the commercial spots to the syndicator.